Question

Compute the monthly payment, total cost of the loan, and amount of interest paid for these car loans. Use the TVM Solver website to answer the following questions. Joanie can get an $11,000 loan for five years at 6% APR. Calculate the total cost of the car.

Answer 1

For answering this exercise, we will use the following formula. according to the information given and assuming that any down payment wasn't made by the customer.

• Present value or Principal = $ 11,000

,

• Months for the loan = 60 (5 years * 12)

,

• Monthly interest rate = 0.06/12

Step 1: Now, for calculating the total cost of the car, we will use this formula:

Total Loan Cost = {(r * PV)/1 - (1 + r)^ -n] * n

Where:

r = 0.06/12

r = 0.005

PV = 11,000

n = 60

Step 2: Replacing these values in the formula:

Total Loan Cost = {(0.005 * 11,000)/1 - (1 + 0.005)^ -60] * 60

Total Loan Cost = [55/0.2586 * 60]

Total Loan Cost = 12,761.02

Step 3: Interpretation of the result

The total cost of the car Joanie can get is $ 12,761.02